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SULZER INDIA LIMITED
CMP 320 Date: 30 December, 2005

Our Stock Picking Criteria:
Before going through our rationale for selecting any stock we want to declare our criteria for selection of a stock. We do NOT go by general practice of selecting only ‘A’ group shares or picking only liquid stocks or stocks commonly fancied by market players. We believe Buffet’s principle “Price is what you pay and Value is what you get” without categorizing any stock as Large cap, Mid cap or Small cap.

Company Background and History:
Sulzer India is 80% subsidiary of Sulzer Chemtech, Switzerland. Sulzer Chemtech is a global Engineering leader for separation column and static mixing technologies Its product portfolio consists of process components such as structured packings, trays, static mixers, and related services.
Its product finds application in oil and gas, petrochemical, chemical, and plastics industries. Sulzer offers solutions primarily intended to optimize the performance of industrial processes and plants through lower energy demand, higher product quality, and increased capacity.

 

Previous Quarterly Financial Results:
Quarter	Jan-Mar04	Apr-Jun04	Jul-Sep04	Oct-Dec04	Jan-Mar05	Apr-Jun05	Jul-Sep05
Gross Sales	48.17	115.91	133.81	369.88	149.11	114.17	116.96
Excise Duty	-4.16	-8.54	-12.05	-24.55	-17.47	-12.82	-10.75
Net Sales	44.01	107.37	121.77	345.33	131.65	101.36	106.22
Other Income	7.13	7.39	14.23	17.59	218.69	12.31	16.81
Total Income	51.15	114.76	135.99	362.92	350.33	113.66	123.03
Expenditure	-51.89	-96.26	-121.72	-274.15	-119.6	-104.8	-115.51
Operating Profit	-0.74	18.5	14.27	88.77	230.74	8.86	7.52
Interest	-1.68	-1.5	-1.89	-2.99	-1.59	-1.76	-1.22
Gross Profit	-2.42	16.99	12.39	85.78	229.15	7.1	6.3
Depreciation	-5.32	-6.11	-6.3	-5.21	-4.1	-2.42	-4.56
Profit before Tax	-7.75	10.88	6.09	80.57	225.05	4.68	1.74
Tax	1.68	-3.65	-2.37	-27.8	-51.01	-1.49	-2.64
Profit after Tax	-6.06	7.23	3.71	52.77	174.04	3.19	-0.9
Net Profit	-6.06	7.23	3.71	52.77	174.04	3.19	-0.9
Equity Capital	34.5	34.5	34.5	34.5	34.5	34.5	34.5
EPS	-1.76	2.1	1.08	15.29	50.45	0.92	-0.26
Nos. of Shares - Non Promoters	688907	688907	688907	688907	688907	688907	688907
Percent of Shares - Non Promoters	19.97	19.97	19.97	19.97	19.97	19.97	19.97
Result Type	Q	Q	Q	Q	Q	Q	Q
Source: BSE

Above is last 7 quarter financial performance of company and Figures are in Rupees Million.

Notes: Company is an Engineering company so sales and Profits are not consistent across all the quarters. Company follows Calendar Year as accounting year and about 60% of the yearly sales are booked in Last quarter which is Oct-Dec. Exceptionally high EPS for Jan-Mar 05 was due to one time extra ordinary Income on sale of Compressor Business.

Sector Outlook:
The boom in India’s consumption has resulted in capacity utilisation almost peaking and companies are now rolling out huge capex plans. As per some private Independent Reports the top 300 Indian companies propose to invest Rs 3,20,000 crore (Rs 3200 billion) over the next 12-18 months.
We also feel India has competitive edge in Engineering due to cost advantage and Design Capabilities making it one of best candidate for global outsourcing like IT Industry.

Investment Rationale:
Engineering and related industries are set to boom given expected capex boom. Most of the engineering companies have huge order book. E.g Siemens has order book of 5000Cr. We feel that Sulzer being leader in Process Technologies in Petrochemicals, Steel and have executed projects in Reliance, SAIL etc will be one of the beneficiaries. Additionally going forward we will see lot of outsourcing happening from Indian Subsidiaries to their respective parent. E.g. Alfa Laval is turning major outsourcer for its Parent. Given above factors Investment should be considered in Sulzer India.

Valuation:
For the year 2004 Sulzer declared EPS of 16.71 and It is yet to declare Last Quarter and year 2005 results and we expect company to post EPS of 23 for the year 2005 which is PE of 14.
Sulzer India being MNC is available cheap compared to other MNC companies in India looking at boom in Industrial Capex and Outsourcing opportunity.

 

Disclaimer: Investing in any equity share involves high risk. Investors should take their own Independent decision. The Analyst or firm won't be held liable or responsible for any legal or financial losses suffered by anybody who is investing on the basis of above commentary. As on day of writing Analyst or Firm does not own the above Stock.